As a major lender to the nation’s shipbuilding industry, Export-Import Bank of Korea has been hugely affected by the huge operating loss recorded by Daewoo Shipbuilding and Marine Engineering.
Not only is the state-run bank taking the blame for overlooking the shipbuilder’s faulty management, but it is also reeling from a worsening financial soundness, and likely to face a special audit in the worst case.
Financial authorities are currently considering making additional investments in Korea Eximbank next year, according to the Financial Services Commission on Wednesday.
In addition, the Financial Supervisory Service and the Korea Board of Audit are gearing up for a thorough financial audit on its financial soundness.
Korea Eximbank is the second largest lender to DSME, with over 1.2 trillion won in loans. The nation’s second-largest shipbuilder recently reported an operating loss of 3.03 trillion won ($2.6 billion) for the second quarter this year.
The National Finance Act states that, if a state-run bank is unable to make up for its losses the government can bail it out to maintain its capital adequacy ratio.
Last month, the bank received a B-grade in the government’s regular management assessment. This was the third out of six grades, as well as the lowest to be bestowed on a state-run bank since the evaluation system started back in 2007.
Also, its BIS ratio for capital adequacy stood at 10.5 percent last year, far below the industry’s average of 14.9 percent while the non-performing loan ratio was 2.02 percent, exceeding the average 1.39 percent.
The decrease in the bank’s financial soundness was largely attributable to the collapse of other borrowers such as SPP Shipbuilding and Keangnam Enterprises earlier this year.
Following the losses, the government injected some 40 billion won into Korea Eximbank for its main budget and 75 billion won as supplementary budget.
But with the huge loss suffered by DSME, an extra input of hundreds of billions of won is needed for the state-run bank to survive.
By Bae Hyun-jung (
tellme@heraldcorp.com)
